Court notice to government, Hutch on Vodafone deal

The Delhi High Court on Monday issued notices to the government, telecom major Hutchison Telecom India Ltd (HTIL), Hutch-Essar and its minority shareholders seeking reply to a petition alleging breach of foreign direct investment (FDI) norms in a deal involving Vodafone of Britain.

A bench of Chief Justice MK Sarma and Justice Sanjeev Khanna asked the respondents to file their replies by the next date of hearing, August 9.

Telecom Watchdog, an NGO, alleged that minority shareholders in the firm, Asim Ghosh, Analjit Singh, and another company hold 15.03 per cent stake and they were acting as a front for Hutchison.

Counsel Prashant Bhushan appearing for the petitioner prayed for judicial direction to the government to confiscate the shares held by the minority shareholders including Ghosh and Singh.

When the bench asked the petitioner to amend the petition in view of the clearance given to the deal by the Foreign Investment Promotion Board (FIPB), Bhushan said, "It did not require to file an amended petition as the Board had not taken care of any of the prayers made in the writ petition."

On March 9, the High Court had referred the issue to the FIPB to complete an inquiry within two months on the allegation that foreign companies were holding more than 74 per cent shares in mobile telephony provider Hutch.

The petition filed on March 7, alleged that the Rs 850 billion deal between the telecom major Hutch and Vodafone had flouted the rules as the foreign companies were holding more than 89 per cent shares. It alleged that there were benami or illegal transactions in the deal.

"If all the shares are calculated, the overseas holdings would cross 74 per cent. Because the telecom sector is universally considered to be an extremely sensitive area and most countries of the world including the US and Canada regulate the extent to which foreigners can own interest in a company," said the petition.

Seeking direction to the authorities to initiate prosecution under various sections of the Foreign Exchange Management Act (FEMA) against some of the shareholders, the petition said a huge amount of funds had been transferred through illegal routes to various countries.